Fiat studying AvtoVaz investment

ALTAVILLA VICENTINA, Italy (Reuters) -- Fiat is considering investing in Russia's biggest car maker AvtoVaz but is aware it would require more than just financial commitment, the Italian auto company's CEO said today.

"This is a company that needs bringing back to health, so what would be needed from Fiat should not to be underestimated and goes beyond the investment it would need," Sergio Marchionne said on the sidelines of an event.

He added that such a deal would "open up an enormous market, including ... development of joint platforms with them. It would be a big step forward. We are looking at it, then we'll see."

AvtoVaz's parent, state arms exporter Rosoboronexport, is looking to sell a minority stake in the company to a foreign investor.

In addition to Fiat, it is talking to General Motors and Renault and plans to announce its choice in the coming weeks.

Fiat has previously declined to confirm it was in talks.

Rosoboronexport wants a strategic investor for the country's biggest carmaker because AvtoVaz is having trouble competing against new entrants to its booming home market.

Faced with stagnant demand in their own countries, foreign carmakers are expanding in Russia, which stands to become the biggest market in Europe by 2011, with annual demand reaching 3.3 million cars, according to forecasters.

Marchionne added that his company's talks with German carmaker Daimler were continuing, but if nothing came of them, Fiat had alternatives.

"If [the talks] break off, we have lots of alternatives, from internal development to working with others."

Marchionne said earlier this month Fiat was talking "360 degrees" with Daimler.

Fiat signed a 2.4 billion euro accord with Daimler in June to supply truck engines as part of a wider strategic agreement.

Then last month, Daimler CEO Dieter Zetsche said Mercedes was likely to cooperate on engines with BMW.

"We are entertaining discussions with a number of carmakers, including BMW," Zetsche said at the Tokyo Motor Show.